I have a question about the homestead cap.

What is the difference between market value and appraised or “capped” value?

The market value represents the value for which data indicates the property would sell for on the open market.  The appraised, or “capped” value for a given year is the value that will be used as the starting point for how taxes are calculated for a property that year.  An appraised value lower than the market value will typically be the result of a Homestead Exemption or a Circuit Breaker Cap.

How does the Homestead cap work?

Whenever the market value of a property with a homestead exemption increases more than 10% of the previous year’s value, the Homestead Limitation or Cap will take effect, limiting the increase in the appraised value to 10% of the prior year’s value each year until it reaches the market value. 

For example, if a property had a market value of $200,000 last year, and the market value increased to $250,000 for the current year, the homestead cap would limit the increase in the appraised value to $220,000.

This limitation takes effect the first full tax year after you receive your exemption, does not apply to new improvements made to the property that year, and is removed whenever there is a change in ownership.  If the homestead exemption becomes effective after January 1, the cap limitation will not apply until the January 1 after the exemption has been in place for a full year.

Why does the back of my notice shows the amount of my Capped Limitation getting smaller?

The Capped Limitation shown on the notice is simply the difference between the market value and appraised value for that year.  The homestead cap limits the increase in appraised value to 10% of the prior year’s value until it reaches the market value.  Even if the market value stays the same, the appraised value will go up a maximum of 10% each year until it is the same as the market value.  Since the Capped Limitation is just the difference in those two amounts, it will typically become smaller each year until it eventually goes away entirely.

The back of my notice shows “YES” in the Canceled/Reduced Exemption column for the Capped Limitation row. Have my exemptions been cancelled?

In most cases, the "Yes" in the Canceled/Reduced Exemption column of the notice simply indicates that the cap value has risen to the same value as the market value, but no exemption has been removed.  The front of the notice will show your current exemptions in bold font.  If your exemptions are still listed there, they have not been removed.  If you previously had an exemption, and your current year exemptions on the front of your notice show "No Exemptions" in bold, they have likely been removed.